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An Entangling Scandal Born in Arkansas Woods

Politics: A bad real estate deal grew into a wide-ranging investigation that has changed the political landscape.


WASHINGTON — And so, after six years, the original Whitewater mystery remains unsolved. Three independent counsels spent $52 million and convicted 14 people but found no conclusive answer to the initial question: Did Bill and Hillary Rodham Clinton know about their partners' fraudulent loans in a 1978 Arkansas real estate deal?

Yet "Whitewater" as a political phenomenon outgrew its backwoods origins long ago. The tangled little land controversy launched an investigative juggernaut that became the Clinton administration's deepest political crisis. It helped bring about a period of almost unprecedented rancor in American politics. It produced the impeachment and trial of a president for only the second time in our history. And it led to changes in the law--including the end of the independent counsel system itself.

Whitewater, in short, seemed to harm everyone who touched it.

It began in 1978, when Bill Clinton, then Arkansas' 31-year-old state attorney general, joined his wife in what looked like a sweet deal: a real estate partnership with almost no money down. But the deal turned bad. The Clintons' partners borrowed from their own savings and loan association and the S&L failed, at taxpayer expense.

When Clinton ran for president in 1992, his detractors revived the issue--and raised enough questions to prompt the appointment of an independent counsel in 1994. The Clintons insisted that they had not known about their partners' bad loans but investigators believed they were not getting the whole truth. Mrs. Clinton had done legal work for the real estate partnership but said she could not remember much about the deals she worked on. Her law firm billing records disappeared, only to turn up inexplicably on a table in the White House family quarters. There also were questions about the Clintons' truthfulness on a range of other subjects: the way they fired aides in the White House Travel Office, the use of confidential FBI files, the president's personal relationship with a White House intern, Monica S. Lewinsky.

The case and its byways may be debated forever as one of history's unsolved mysteries--unless, of course, one of the protagonists reveals new facts in his (or her) memoirs later in the 21st century.

Clinton partisans will argue that the independent counsels' inability to prove wrongdoing shows that the president and first lady were blameless victims of overzealous prosecutors. Clinton opponents will assert, instead, that it means they succeeded in a cover-up.

"The argument will never end," said Larry Sabato, a professor at the University of Virginia who has made a specialty of studying political scandals. "This story of scandal and impeachment is part of the permanent historical definition of this administration."

'Complicated Scandal' Didn't Move Voters

The Whitewater issue itself never became a major political problem for Clinton because it was so tangled, Sabato said: "The public can't interpret a complicated scandal."

But it laid the political groundwork for other charges against the president, he said. Much of the press and public, after puzzling over the mysteries of Whitewater, were more ready to doubt Clinton's word when he denied having an affair with Lewinsky.

"Whitewater was significant in that it created a background subtext for all the other scandals that followed," Sabato said. "The very same factors were at work: untrustworthiness, dishonesty, conspiracy theories. It set a precedent for all the succeeding scandals."

Whitewater also set a worrisome precedent, he said, in the way the investigation grew. "One lesson of Whitewater is that a scandal lasts forever," he said. "There's a clear beginning but not necessarily an end."

When it all began, Clinton was earning $26,500 a year as state attorney general but he was favored to become the next governor. His wife, like her husband a Yale Law School graduate, was earning a bit more as a private lawyer.

They were offered half interest in a 230-acre land development along the Whitewater River in the Ozarks and it would cost them nothing. James B. McDougal, a banker and real estate developer, was anxious to have the soon-to-be governor as his business partner. Sale of the vacation plots was supposed to pay the cost of the loan for the purchase of the land and leave the partners with a healthy profit.

But the get-rich-easy scheme turned into a fiasco. Few plots actually were sold and McDougal diverted money from his savings and loan to pay off the loans.

The Clintons ended up losing money in the deal; exactly how much is disputed.

More important, the long inquiry has failed to conclusively answer the questions that started it: Did Gov. Clinton or his wife know anything about the wrongdoing of their business partner?

On the one hand, independent counsel Robert Ray says, there is "insufficient evidence" to prove any wrongdoing. Given the extraordinary intensity of the investigation, the Clintons can claim that they were cleared of the charges.

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